The Scramble Over The Sequester Showdown

If Congress fails to make a deal on government spending and taxation before Friday, federal cuts of more than 85 billion dollars will be enacted. NPR White House correspondent Scott Horsley discusses the politics of a potential deal and the options for avoiding sequestration.

Transcript

JENNIFER LUDDEN, HOST:

Friday is the deadline for Congress to reach a deal on federal spending and taxation. If it does not, the government will have to make cuts of more than $85 billion this year. These automatic reductions could mean positions eliminated, mandatory furloughs, flight delays. At the gathering of the National Governors Association this morning, President Obama urged compromise over politics.

(SOUNDBITE OF SPEECH)

PRESIDENT BARACK OBAMA: All of us are elected officials. All of us are concerned about our politics, both in our own party's, as well as the other party's. But, at some point, we've got to do some governing. And certainly, what we can't do is keep careening from manufactured crisis to manufactured crisis.

LUDDEN: This week's political maneuvering will determine whether the nation faces sequester on March 1st. If you're wondering what the sequester could mean for you, email us at talk@npr.org. We'll answer your questions on Thursday's show. And you can join the conversation at our website. Go to npr.org and click on TALK OF THE NATION. NPR White House correspondent Scott Horsley joins us now in Studio 3A to talk about the politics of a potential deal. Hi, Scott.

SCOTT HORSLEY, BYLINE: Good to be with you.

LUDDEN: Is it a manufacturing crisis?

HORSLEY: Well, it is, in the sense that it's made here in Washington. In fact, it's the only thing we manufacture in Washington these days, are economic crises. That's not to say it's artificial. These are real dollars that are going to be taken out of the economy if nothing's done to avert this crisis. But it was manufactured back in the summer of 2011, when part - both the Democrats and the Republicans were looking for some deal they could agree on that would allow the Congress to raise the debt ceiling.

And at the time, of course, this was meant as a cudgel. This was meant to be the guardrail that nobody would want to go over and suffer the consequences of these stinging and indiscriminate budget cuts. And we've had now a little over a year and a half for the lawmakers and the White House to try to come up with some alternative. They haven't been able to do so, and so now we're actually staring at this - the sequester, which was - nobody wanted to happen.

LUDDEN: That's like each side has called the others' bluff.

HORSLEY: Yeah. They - yeah. This was a game of chicken, and so far, nobody is willing to hit the breaks.

LUDDEN: So where are we now? Or is there any even pretense of meeting, talking, voting?

HORSLEY: Yes. There - that's exactly what there is. There's sort of a pretense. We're going to have action probably in the Senate this week, where both the Republicans and the Democrats will offer up their ideas for how to avoid the sequester. Neither is likely to win any kind of bipartisan support. What the Democrats in the Senate are proposing is to replace these across-the-board spending cuts with a combination of more targeted spending cuts, and also some additional tax revenues.

One vehicle for additional tax revenues would be to put in place the so-called Buffett rule, which would say that millionaires would have a minimum tax rate of 30 percent. It's named for billionaire investor Warren Buffett, who famously paid a lower tax rate than his secretary. That's not likely to really go anywhere with the Republicans, and certainly not with the Republicans in the House.

The Senate Republicans, their idea, and the idea that's been put forth a couple of times now by House Republicans, is to replace the across-the-board spending cuts with even deeper cuts on a smaller portion of the federal budget. In a sense, they want to get rid of some of the defense spending cuts, but double down on cuts to programs that primarily benefit the poor. That's not likely to win much support among Democrats.

So neither of them is really talking about the kinds of things that might win some bipartisan support, and more importantly, that would actually make a difference to the federal deficit. So we're kind of stuck with an indiscriminate, automatic sequester coming on Friday.

LUDDEN: And remind us - so, indiscriminate. There's - they're hampered in how they can carry this out. What does it mean?

HORSLEY: Well, that's right. I mean, we have talked about - you know, one of the things you all hear, for example, some of the governors who were in town this week saying is, well, you know, we're really talking about a fairly small percentage of the overall federal budget. And that's true, in terms of the dollar amount. Eighty-five billion dollars is only a couple of percent of the overall federal budget. But in setting up the sequester what the Congress and the president did was - say, well, we're not going to touch Social Security. Of course, that's a big chuck of the federal budget. So that's off-limits. We're also, for the most part, going to hold Medicare harmless. That's another big chunk of the budget. That's also off-limits. Defense is going to be affected, but not salaries for men and women in uniform.

So if you take all those things, sort of off the table and you say, now we're going to apply this $85 billions in cuts to what's left and once more, we're going to do it in just about half of the fiscal year, the percentages start creeping up. Again, it's, you know, we're not talking about cutting programs by half, but we're looking more like an 8 or 9 percent reduction in spending. And it's - of those remaining things that he government does, it's across the board. And so...

LUDDEN: So you can't say, we have this program here. It is kind of, really, not working very well. We'd like to get rid of it, but we can't do that. We have to cut 9 percent of that and 9 percent of the program that is really working.

HORSLEY: Yeah. That's right. It was designed to be a brain dead spending cut.

(LAUGHTER)

HORSLEY: It was. There's deliberately no opportunity to set priorities or to triage or to put money where it will do the most good and maybe take money from - where it's not doing so much good, or to do it to preserve funding and programs where the money is needed immediately and take money away from programs where, maybe, the money wouldn't be needed for a while anyway. Now it's got to be from across every line item an equal proportional amount.

And so, it is, in the words of Erskine Bowles, the co-chair of the president's deficit reduction committee, stupid, stupid, stupid. It's stupid because it makes no attempt to set priorities. It's stupid because it takes money away from the things that we should be spending money on right now to boost the economy - things like public works projects - and it doesn't take money away from those things which are the biggest drivers in the deficit, namely, rising health care costs.

LUDDEN: All right. Let's get a caller on the line. Rob is in Woodstock, Kansas. Hi, Rob.

ROB: Hello.

LUDDEN: Go ahead.

ROB: My concern is, is I've been trying to get a hold of my senator in - at the Veterans' Administration and the Disabled American Veterans and everybody else. And I'm a (unintelligible) service connected veteran, Vietnam veteran, and I've been disabled because of my service to over there, and my disability pension is the only thing I've got going for me. How is the sequester going to affect the Veteran's Administration and people like me who are disabled and can't do anything else and don't have any options?

HORSLEY: Well, good news for Rob is that the VA is also, for the most part, exempt from these cuts. So that's should be OK.

ROB: All right.

HORSLEY: Again, in setting the sequester up back in the summer of 2011, they did take pains to leave some things off the table, for example, food stamps are also not affected. I mentioned Social Security, not affected. For the most part, Medicare is not affected. I say for the most part because payments to providers, doctors in hospitals can be cut by a small amount, but benefits to recipients of Medicare are not affected. Medicaid is also not affected.

LUDDEN: OK. Rob, thanks so much for the call. So, Scott, if no one...

HORSLEY: I should say though that while the VA itself is mostly held harmless and recipients of VA benefits, there are some programs within the VA that will see some effects. It's not entirely held harmless.

LUDDEN: All right. Wait, we've got someone who may not be convinced here. Homer in Sacramento, welcome to TALK OF THE NATION.

HOMER: Thank you for taking my call. I just heard what was now said about Social Security and I'm grateful of that because I'm blind and I receive SSI, but maybe I'm not so informed about it, but how do we know that for sure?

LUDDEN: They will not affect Social Security?

HOMER: Yeah.

LUDDEN: OK. Thanks, Homer.

HORSLEY: Well, I guess it is a case we just going to have to trust the federal government. But this is a case where the federal government gives and takes away, and they're not taking away from Social Security benefits. So, Homer, you should be OK. Folks that receive SSI, that's Social Security disability payments. The regular Social Security for seniors, those checks won't be affected by this. So there are, you know, and those again, those are major parts of the federal government, and that means it's good for the people that are dependent on those programs, that that won't be touched. On the other hand, that means if you're trying to cut $85 billion, you're trying to cut a bigger piece out of a smaller pie.

LUDDEN: So Scott, if no one - if neither side apparently thought these would actually happen when they agree to the sequester - was it 2011?

HORSLEY: 2011. That's right.

LUDDEN: What changed between then and now?

(LAUGHTER)

HORSLEY: Well, I guess they underestimated the stubbornness of the opposite party.

LUDDEN: But you hear a lot of Republicans saying, this is great. Go right ahead. Let's have the sequester.

HORSLEY: What we're actually seeing is kind of a split in the Republican Party, not for the first time. One of the calculations that the White House made - well, when the sequester was set up, it was designed to whack things that were near and dear to both parties' heart. That was - the idea was at that way, both parties would really have an incentive to make some painful choices and cut a deal, the so-called grand bargain to cut the deficit.

The thing that Republicans are always reluctant to do is to raise tax revenues in a grand bargain. And the thing that democrats are always reluctant to do is to whittle away any entitlement programs, in particular, Medicare, Medicaid. Those are the ones with the past-growing health care costs. And to a lesser extent, Social Security, which the president often says is not a big driver of the budget, and that's kind of separate.

But - so the tough thing for Democrats to do is to attack entitlements. The tough thing for Republicans to do is raise tax revenues. That's for - the entire length of negotiation has been the stumbling block to getting some kind of grand deficit-cutting bargain.

So the sort of alternative pain in the sequester was, OK, Republicans are going to have to suffer through big cuts in defense programs. Those have traditionally been near and dear to Republicans. And Democrats are going to have to suffer in - with big cuts to programs like Pell Grants and all the sort of spending on the less fortunate that Democrats are fond of - education, Head Start, Meals on Wheels, things like that. It turns out that the reluctance of Democrats to go after entitlements, and really more importantly, the reluctance of Republicans to raise tax revenues, is even stronger than their reluctance to see defense spending cut, at least for some Republicans.

Now there are Republican lawmakers who are more alarmed about the defense cuts. And some of them have actually said, well, you know, maybe we ought to think about doing some revenue enhancement here. And certainly President Obama has said, I'm willing to talk about making cuts to entitlement programs. But if you look at the - across the spectrum of the lawmakers, they haven't been willing to make that kind of big compromise.

LUDDEN: All right. You're listening to TALK OF THE NATION from NPR News.

Scott's in Cedar Rapids, Iowa. Hi there, Scott.

SCOTT: Hi. I had one quick question that might be - to sway my support for the sequester.

(LAUGHTER)

SCOTT: Is there an across-the-board payroll cut of 8 or 9 percent for Congress as well.

(LAUGHTER)

SCOTT: I mean, are they putting their money where their mouth is?

LUDDEN: And let's just clarify here, Scott. If there is, you're going to support it? Am I'm guessing right?

SCOTT: Oh, yes, absolutely.

(LAUGHTER)

LUDDEN: Thanks for the call. Scott Horsley.

HORSLEY: Boy, that's - that is a good question. I don't know the answer to that question.

LUDDEN: Oh, you're going to have to do research.

(LAUGHTER)

HORSLEY: We'll...

LUDDEN: You got to come back.

HORSLEY: We'll have to check into that. I don't think any congressional staffers are going to be subject to the kind of furloughs that the rest of the federal workforce is likely to face.

Now, there was a separate move, of course, that the House Republicans put through, the no budget, no pay, which was going to dock the pay - dock, and not just by 9 percent but dock the pay entirely of lawmakers if they couldn't come up with a budget. But that's for next year. That's next year's budget, not the short-term sequester.

LUDDEN: What about - Scott, this - it seems to be, you know, competing narratives here. We've heard the president ramp his warnings about how dire this is going to be and, you know, people on spring break are going to have to wait an hour in line at the security checks. Some airports may even close. And then you hear Republicans saying, ah, it's not going to be that bad.

HORSLEY: Yeah. Last Friday, we had the Transportation Secretary Ray LaHood at the White House telling us about air traffic control towers would have to be closed or shut down overnight, long lines and long waits for planes flying between major hubs this summer.

Today, we had the Homeland Security Secretary Janet Napolitano at the White House telling us that we're going to have longer lines at Customs when you come back into the U.S., and that - waits at the border or at ports for cruise ships terminals would be longer. So, all in all, it sounds like not a great formula for the tourism business. But it's in the administration's interest to sort of maximize the sense that people have about how severe these cuts are going to be because they're trying to get lawmakers to budge off their stubborn positions and make a deal.

On the other hand, it's sort of in the interest of Republicans to downplay the sequester, to downplay the impact. You know, philosophically, Republicans in general are advocates of smaller government and they think that a lot of what the government does now it shouldn't be doing. So they try to say, well, you know, we can - if we can have a little less government, that's probably a good thing.

LUDDEN: And do we have any sense which one is more right?

HORSLEY: Well, this is going to be a real, interesting practical test. I mean, one danger for the Democrats is that if the sequester comes into effect on Friday and there's - everybody sort of wakes up and says, huh, that wasn't so bad; for the Democrats, if they sort of overplay their hand, this might just sort of be proof for the Republicans that, well, we were spending too much and we can get along fine without it.

On the other hand, if folks really are bothered, if people feel like, you know, the government services have really suffered, that could come back to haunt the Republicans as sort of the champions of the spending cuts.

LUDDEN: And couldn't what happens play into now - we just feel like we're going from deadline to deadline here. Isn't March - tell me about March 27th. That's kind of a next deadline.

HORSLEY: Yeah. That's the next deadline, and that's when the government's authority to spend money altogether runs out. They're operating now on sort of a short-term lease here. And that expires at the end of March. And I think a lot of the betting now in Washington is that this sequester probably will go into effect and nothing much will happen until we get to that next deadline.

At that point, we're talking about a much more severe government scale-back. It's not that everything would close. I mean, we'd still fly fighter planes and the men and women in uniform would keep doing their jobs. And all the, quote, unquote, "essential government personnel" will continue show up. But you'd see an even more severe dialing-back of government services if they don't make a deal to extend that short-term lease on the government here. So that'll sort of be the next pressure point when lawmakers will be under some pressure to make a deal.

LUDDEN: And then it's the thinking that however this plays out in the month March, that it could influence some yet potential bargain or compromise, where you talked about, you know, efforts to get more targeted cuts or to find some middle ground. Is that still a possibility by March 27th?

HORSLEY: Well, yeah, absolutely. And, again, if folks are not really feeling - that is, you know, the people whose opinions Congress cares about, if they're not really feeling the effects of the cuts, it'll be - the Republicans will be in a stronger position to say, as we negotiate a longer-term spending plan, let's keep the spending at right where it is, or maybe scale it back some more. If people are really crying uncle, I'm saying, oh, my planes are - have been delayed too long and if these are the folks who are dependent on Meals on Wheels are screaming bloody murder and that actually carries weight with the lawmakers, they might say, OK, let's think about how we might do this in a different way.

LUDDEN: All right. NPR's White House correspondent Scott Horsley spoke with us. Thank you so much. We'll see what happens. Thanks, Scott.

Tomorrow, a year after his death, we'll talk about what changed since Trayvon Martin was shot and killed in Florida. Join us for that. This is TALK OF THE NATION from NPR News. I'm Jennifer Ludden in Washington. Transcript provided by NPR, Copyright NPR.